An appeals court today ruled that streaming startup Aereo is within its rights to stream broadcast TV over the Internet.

The U.S. Court of Appeals for the Second Circuit found that Aereo is not infringing on the copyrights of broadcasters like Fox, ABC, CBS, and more.

Aereo, which is backed by IAC Chairman Barry Diller, manufactures tiny HDTV antennas and then stores the content they capture on remote servers. Aereo serves a single market - New York City - and provides access to NBC, ABC, CBS, Fox, the CW, and other local channels. Users can record shows, and don't need to purchase or install any equipment.

In March 2012, Twentieth Century Fox, Fox Television, Univision, PBS, two local New York TV stations, ABC, Disney, CBS, NBCUniversal, Universal Network Television, and Telemundo sued Aereo for copyright infringement. In essence, the TV stations believe Aereo will cost them money. But they also voiced concern about unfair competition and piracy.

In July, a New York judge ruled that Aereo could continue operating while the court battle played out. Today, the appeals court upheld the lower court ruling, paving the way for Aereo to expand to other markets.

"We conclude that Aereo's transmissions of unique copies of broadcast television programs created at its users' requests and transmitted while the programs are still airing on broadcast television are not 'public performances' of the [broadcasters'] copyrighted works under Cablevision," the appeals court ruled. "As such, [broadcasters] have not demonstrated that they are likely to prevail on the merits on this claim in their copyright infringement action. Nor have they demonstrated serious questions as to the merits and a balance of hardships that tips decidedly in their favor. We therefore affirm the order of the district court denying the [broadcasters] motion."

Today's decision focused on the 2008 battle between Cablevision and various content holders, which accused the cable network of violating copyrights with its DVR. In that case, DVR functionalities were found not to constitute copyright infringement.

The appeals court said that an injunction against Aereo could only be approved if the broadcasters could prove that Aereo infringed on their public performance rights. But in examining the issue, the panel ruled that since Aereo provides content on a per subscriber basis rather than to the public at large, "the transmission is not a public performance."

"When an Aereo customer elects to watch or record a program using either the 'Watch' or 'Record' features, Aereo's system creates a unique copy of that program on a portion of a hard drive assigned only to that Aereo user," the ruling said. "And when an Aereo user chooses to watch the recorded program, whether (nearly) live or days after the program has aired, the transmission sent by Aereo and received by that user is generated from that unique copy. No other Aereo user can ever receive a transmission from that copy. Thus, just as in Cablevision, the potential audience of each Aereo transmission is the single user who requested that a program be recorded."

The broadcasters argued that Aereo needs a license to provide content to users (Cablevision has licenses). But the court said Aereo doesn't need a license because the content is not considered a public performance.

"Today's decision from the Second Circuit Court of Appeals again validates that Aereo's technology falls squarely within the law and that's a great thing for consumers who want more choice and flexibility in how, when and where they can watch television," Chet Kanojia, Aereo CEO and founder, said in a statement. "Today's ruling ... sends a powerful message that consumer access to free-to-air broadcast television is still meaningful in this country and that the promise and commitment made by the broadcasters to program in the public interest in exchange for the public's spectrum, remains an important part of our American fabric."

The news comes shortly after the Wall Street Journalpublished a story that said Aereo was in talks with AT&T and Dish Network to expand its service. Those talks, however, had not resulted in any deals yet - mostly because of the pending lawsuit, the Journal said. Aereo and AT&T declined to comment on the story, and Dish did not immediately respond to a request for comment.

About the Author

Before joining PCMag.com, Chloe covered financial IT for Incisive Media in NYC and technology policy for The National Journal's Technology Daily in Washington, DC. She has held internships at NBC's Meet the Press, washingtonpost.com, the Tate Gallery press office in London, Roll Call, and Congressional Quarterly. She graduated with a bachelor's deg... See Full Bio

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